General Insurance: Rear view is essential, but need to brace for windshield of 2016

Various legal and regulatory developments have set the stage for a spectacular ride through the year ahead

The general insurance industry had an eventful journey through 2015 to reminisce. The approval of new insurance Act combined with the long-awaited FDI hike, social sector schemes and numerous regulatory modifications took us a step closer to generate capital, expand points of sale and enhance customer experience.

The financial inclusion efforts of the Centre through Pradhan Mantri Suraksha Bima Yojana (PMSBY) helped us build inroads into markets, which were hitherto out of reach. Once these 1.17 million-strong PMSBY policyholders get a taste of insurance, we are sure they would graduate to other verticals such as home and fire insurance.

Home insurance assumes importance in the wake of catastrophes such as Chennai, J&K and Uttarakhand floods.

With severe climatic changes, it is quintessential that government and individuals consider insurance to mitigate economic losses. The solution offered by general insurers and GIC in the form of Insurance Catastrophe Pool would not just benefit victims, but also reduce the burden on government exchequer consumed to rehabilitate massive dwelling grounds.

These natural calamities re-emphasise the importance of digitised policies facilitated via e-insurance, which ensure the policyholder to update personal details frequently, thus enhancing transparency and efficiency. The regulatory nod for storing data electronically would further reduce administrative cost apart from expediting claim settlements. Apart from paving the way for fast-paced development, the Insurance laws (Amendment) Bill, 2015 also placed additional responsibility on the shoulders of non-life players. Segment-wise reporting was mandated to keep cross-subsidisation at bay.

While the rear view is essential, we need to brace for the windshield of 2016. The legal and regulatory developments have set the stage for a spectacular ride through the year ahead. The bancassurance channel, which has been our strength, would be under pressure after banks have been permitted to tie up with three players. An additional hurdle has been placed restricting the sum assured per year at R5 crore per risk. But access to RRBs, NBFCs, NGOs and micro lending institutions, who can act as corporate agents, opens a plethora of opportunities.

Another game changer would be the engagement of customer service centre (CSC) for sales and service of insurance policies. The strength of CSCs would be doubled with availability of simple over the counter products mooted by the regulator.

Another new category would be the battery-powered e-carts and e-rickshaws, which have been brought in by the Motor Vehicles Amendment Act, 2015. There would be longer-tenure offerings in other verticals such as four-wheelers or even health, after the industry successfully tested the waters with two-to-three-year two-wheeler
insurance.

But new products also call for collaborative efforts from the industry to restrict fraudulent claims, especially in the wake of the no-rejection clause for policies in force for more than 3-years introduced by the new insurance Act.

Cracking a whip on fraudulent claims would be possible with Registry of Hospitals in Network of Insurance (Rohini), which maintains data on 35,000 hospitals using 13-digit globally unique ID (GLN) and geo-coding. Eradicating baseless claims, which have been on the rise and faster claim settlement would be an outcome of Rohini platform.

If enacted upon, IRDAI’s suggestion to link premium to CPI inflation would help increase prices in tandem with general price rise and avoid customer resentment to sudden premium hikes. The developments and elaborate reforms witnessed during the year would paddle the industry to higher growth and improve penetration of non-life products, which stands at an abysmal 0.8% in 2014-15.